Bill S2739B-2013

Establishes a credit against income tax for the rehabilitation of distressed residential properties

Establishes a credit against income tax for the rehabilitation of distressed residential properties; allows a credit equal to thirty percent of the qualified rehabilitation expenditures made by the taxpayer with respect to a qualified distressed residential property; requires property that qualifies must be constructed prior to January 1, 1962 in a distressed residential or mixed-use neighborhood.

Memo

TITLE OF BILL: An act to amend the tax law, in relation to establishing a credit against income tax for the rehabilitation of distressed residential properties

SUMMARY OF PROVISIONS: This bill would create a new tax credit program to encourage the rehabilitation of distressed residential property.

Section 1 - amends section 606 of the Tax Law by adding a new subsection (ccc) which creates a tax credit for the rehabilitation of distressed residential property.

(1) For taxable years beginning after January 1, 2014, taxpayers shall be allowed a credit equal to thirty percent of the qualified expenditures made by the taxpayer with respect to a qualified distressed residential property.

(2) The credit shall not exceed $100,000. Credits are allowed in the taxable year in which the property is deemed a certified rehabilitation.

(3) Credits may be carried forward, but not more than $25,000 in any year.

(4) Defines qualified rehabilitation expenditure. Expenditures must be made after January 1, 2014 and before December 31, 2019.

(5) Defines certified rehabilitation.

(6) Defines qualified distressed residential property.

(7) Provides for recapture of tax credits in the event the rehabilitated distressed residential property is disposed of within five years after receiving the credit.

(8) Credit claimed under this subsection shall not be eligible for any other credit.

Section 2 - amends subparagraph (B) of paragraph 1 of subsection (i) of section 606 by adding a new clause (xli) enumerating the new credit for rehabilitation of distressed residential property.

Section 3 - amends section 210 of the Tax law to add a new subdivision 50.

(1) For taxable years beginning after January 1, 2014, taxpayers shall be allowed a credit equal to thirty percent of the qualified expenditures made by the taxpayer with respect to a qualified distressed residential property.

(2) The credit shall not exceed $100,000. Credits are allowed in the taxable year in which the property is deemed a certified rehabilitation.

(3) Credits may be carried forward, but not more than $25,000 in any year.

(4) Defines qualified rehabilitation expenditure. Expenditures must be made after January 1, 2014 and before December 31, 2019.

(5) Defines certified rehabilitation.

(6) Defines qualified distressed commercial property.

(7) Provides for recapture of tax credits in the event the rehabilitated distressed residential property is disposed of within five years after receiving the credit.

(8) Credit claimed under this subsection shall not be eligible for any other credit.

Section 4 - provides that this act shall take effect immediately and shall apply to taxable years on or after January 1, 2014.

PURPOSE AND JUSTIFICATION: In many communities across New York State, whether towns, villages, suburbs or cities, there are areas of rundown and dilapidated residential buildings. These residential buildings may have not have received any significant updating for years, and they are now vacant or underperforming properties that give their whole neighborhoods a rundown appearance and at best are not attractive places to live. Rehabilitating these properties will benefit communities, make these areas economically attractive for new and existing residents and help to revive the economy of our state. Under this legislation, it will be up to local communities to identify, by local law, areas that are dilapidated and in need of rehabilitation, and to confirm that rehabilitation work is completed to the satisfaction of their building departments and certificates of occupancy were issued for the work done. Residents and communities, as well as the state as a whole, will be rewarded with rejuvenated neighborhoods.

EXISTING LAW: Various tax credits are offered to encourage activities that will benefit the state.

EFFECTIVE DATE: This act shall take effect immediately and shall apply to taxable years beginning on or after January 1, 2014.

Text

STATE OF NEW YORK
________________________________________________________________________
2739--B
2013-2014 Regular Sessions
IN SENATE
January 23, 2013
___________

Introduced by Sens. RANZENHOFER, LANZA, LARKIN, LATIMER, VALESKY -- read
twice and ordered printed, and when printed to be committed to the
Committee on Investigations and Government Operations -- recommitted
to the Committee on Investigations and Government Operations in
accordance with Senate Rule 6, sec. 8 -- committee discharged, bill
amended, ordered reprinted as amended and recommitted to said commit-
tee -- reported favorably from said committee and committed to the
Committee on Finance -- committee discharged, bill amended, ordered
reprinted as amended and recommitted to said committee
AN ACT to amend the tax law, in relation to establishing a credit
against income tax for the rehabilitation of distressed residential
properties
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Section 606 of the tax law is amended by adding a new
subsection (ccc) to read as follows:
(CCC) CREDIT FOR REHABILITATION OF DISTRESSED RESIDENTIAL PROPERTIES.
(1) FOR TAXABLE YEARS BEGINNING ON OR AFTER JANUARY FIRST, TWO THOUSAND
FOURTEEN, A TAXPAYER SHALL BE ALLOWED A CREDIT AS HEREINAFTER PROVIDED,
AGAINST THE TAX IMPOSED BY THIS ARTICLE, IN AN AMOUNT EQUAL TO THIRTY
PERCENT OF THE QUALIFIED REHABILITATION EXPENDITURES MADE BY THE TAXPAY-
ER WITH RESPECT TO A QUALIFIED DISTRESSED RESIDENTIAL PROPERTY.
PROVIDED, HOWEVER, THE CREDIT SHALL NOT EXCEED ONE HUNDRED THOUSAND
DOLLARS.
(2) TAX CREDITS ALLOWED PURSUANT TO THIS SUBSECTION SHALL BE ALLOWED
IN THE TAXABLE YEAR IN WHICH THE PROPERTY IS DEEMED A CERTIFIED REHABIL-
ITATION.
(3) IF THE AMOUNT OF THE CREDIT ALLOWABLE UNDER THIS SUBSECTION FOR
ANY TAXABLE YEAR SHALL EXCEED THE TAXPAYER'S TAX FOR SUCH YEAR, THE
EXCESS MAY BE CARRIED OVER TO THE FOLLOWING YEAR OR YEARS, AND MAY BE

EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD05245-06-4

S. 2739--B 2

APPLIED AGAINST THE TAXPAYER'S TAX FOR SUCH YEAR OR YEARS, BUT SHALL NOT
EXCEED TWENTY-FIVE THOUSAND DOLLARS.
(4) (A) THE TERM "QUALIFIED REHABILITATION EXPENDITURE" MEANS, FOR
PURPOSES OF THIS SUBSECTION, ANY AMOUNT PROPERLY CHARGEABLE TO A CAPITAL
ACCOUNT:
(I) IN CONNECTION WITH THE CERTIFIED REHABILITATION OF A QUALIFIED
DISTRESSED RESIDENTIAL PROPERTY, AND
(II) FOR PROPERTY FOR WHICH DEPRECIATION WOULD BE ALLOWABLE UNDER
SECTION 168 OF THE INTERNAL REVENUE CODE.
(B) SUCH TERM SHALL NOT INCLUDE (I) THE COST OF ACQUIRING ANY BUILDING
OR INTEREST THEREIN, (II) ANY EXPENDITURE ATTRIBUTABLE TO THE ENLARGE-
MENT OF AN EXISTING BUILDING, OR (III) ANY EXPENDITURE MADE PRIOR TO
JANUARY FIRST, TWO THOUSAND FOURTEEN OR AFTER DECEMBER THIRTY-FIRST, TWO
THOUSAND NINETEEN.
(5) THE TERM "CERTIFIED REHABILITATION" MEANS, FOR PURPOSES OF
DISTRESSED RESIDENTIAL PROPERTY IN THIS SUBSECTION, ANY REHABILITATION
OF A CERTIFIED DISTRESSED RESIDENTIAL PROPERTY WHICH HAS BEEN APPROVED
AND CERTIFIED BY A LOCAL GOVERNMENT AS BEING COMPLETED, WITH A CERTIF-
ICATE OF OCCUPANCY ISSUED, AND THAT THE COSTS ARE CONSISTENT WITH THE
WORK COMPLETED. SUCH CERTIFICATION SHALL BE ACCEPTABLE AS PROOF THAT THE
EXPENDITURES RELATED TO SUCH REHABILITATION QUALIFY AS QUALIFIED REHA-
BILITATION EXPENDITURES FOR PURPOSES OF THE CREDIT ALLOWED UNDER PARA-
GRAPH ONE OF THIS SUBSECTION.
(6) (A) THE TERM "QUALIFIED RESIDENTIAL PROPERTY" MEANS, FOR PURPOSES
OF THIS SUBSECTION, A DISTRESSED RESIDENTIAL PROPERTY LOCATED WITHIN NEW
YORK STATE:
(I) WHICH HAS BEEN SUBSTANTIALLY REHABILITATED,
(II) WHICH WAS CONSTRUCTED PRIOR TO JANUARY FIRST, NINETEEN HUNDRED
SIXTY-TWO,
(III) WHICH IS OWNED BY THE TAXPAYER, AND
(IV) WHICH IS LOCATED WITHIN A DISTRESSED RESIDENTIAL OR MIXED-USE
AREA, AS IDENTIFIED BY EACH LOCALITY THROUGH LOCAL LAW, THAT IS DEEMED
AN AREA IN NEED OF COMMUNITY RENEWAL DUE TO DILAPIDATION AND VACANCIES.
(B) IF THE DISTRESSED RESIDENTIAL PROPERTY IS RENTAL PROPERTY, SUCH
PROPERTY SHALL HAVE BEEN VACANT FOR AT LEAST SIX MONTHS WHILE ACTIVELY
MARKETED FOR LEASE.
(C) A BUILDING SHALL BE TREATED AS HAVING BEEN "SUBSTANTIALLY REHABIL-
ITATED" IF THE QUALIFIED REHABILITATION EXPENDITURES IN RELATION TO SUCH
BUILDING TOTAL TEN THOUSAND DOLLARS OR MORE.
(7) (A) IF THE TAXPAYER DISPOSES OF SUCH TAXPAYER'S INTEREST IN THE
QUALIFIED DISTRESSED RESIDENTIAL PROPERTY, OR SUCH PROPERTY CEASES TO BE
USED AS A RESIDENTIAL PROPERTY OF THE TAXPAYER WITHIN FIVE YEARS OF
RECEIVING THE CREDIT UNDER THIS SUBSECTION, THE TAXPAYER'S TAX IMPOSED
BY THIS ARTICLE FOR THE TAXABLE YEAR IN WHICH SUCH DISPOSITION OR CESSA-
TION OCCURS SHALL BE INCREASED BY THE RECAPTURE PORTION OF THE CREDIT
ALLOWED UNDER THIS SUBSECTION FOR ALL PRIOR TAXABLE YEARS WITH RESPECT
TO SUCH REHABILITATION.
(B) FOR PURPOSES OF SUBPARAGRAPH (A) OF THIS PARAGRAPH, THE RECAPTURE
PORTION SHALL BE THE PRODUCT OF THE AMOUNT OF CREDIT CLAIMED BY THE
TAXPAYER MULTIPLIED BY A RATIO, THE NUMERATOR OF WHICH IS EQUAL TO SIXTY
LESS THE NUMBER OF MONTHS THE BUILDING IS OWNED OR USED AS RESIDENTIAL
PROPERTY BY THE TAXPAYER AND THE DENOMINATOR OF WHICH IS SIXTY.
(8) ANY EXPENDITURE FOR WHICH A CREDIT IS CLAIMED UNDER THIS
SUBSECTION SHALL NOT BE ELIGIBLE FOR ANY OTHER CREDIT UNDER THIS CHAP-
TER.

S. 2739--B 3

S 2. Subparagraph (B) of paragraph 1 of subsection (i) of section 606
of the tax law is amended by adding a new clause (xli) to read as
follows:
(XLI) CREDIT FOR REHABILITATION AMOUNT OF CREDIT
OF DISTRESSED RESIDENTIAL UNDER SUBDIVISION FIFTY
PROPERTIES UNDER SUBSECTION (CCC) OF SECTION TWO HUNDRED TEN
S 3. Section 210 of the tax law is amended by adding a new subdivision
50 to read as follows:
50. CREDIT FOR REHABILITATION OF DISTRESSED RESIDENTIAL PROPERTIES.
(1) FOR TAXABLE YEARS BEGINNING ON OR AFTER JANUARY FIRST, TWO THOUSAND
FOURTEEN, A TAXPAYER SHALL BE ALLOWED A CREDIT AS HEREINAFTER PROVIDED,
AGAINST THE TAX IMPOSED BY THIS ARTICLE, IN AN AMOUNT EQUAL TO THIRTY
PERCENT OF THE QUALIFIED REHABILITATION EXPENDITURES MADE BY THE TAXPAY-
ER WITH RESPECT TO A QUALIFIED DISTRESSED RESIDENTIAL PROPERTY.
PROVIDED, HOWEVER, THE CREDIT SHALL NOT EXCEED ONE HUNDRED THOUSAND
DOLLARS.
(2) TAX CREDITS ALLOWED PURSUANT TO THIS SUBDIVISION SHALL BE ALLOWED
IN THE TAXABLE YEAR IN WHICH THE PROPERTY IS DEEMED A CERTIFIED REHABIL-
ITATION.
(3) IF THE AMOUNT OF THE CREDIT ALLOWABLE UNDER THIS SUBDIVISION FOR
ANY TAXABLE YEAR SHALL EXCEED THE TAXPAYER'S TAX FOR SUCH YEAR, THE
EXCESS MAY BE CARRIED OVER TO THE FOLLOWING YEAR OR YEARS, AND MAY BE
APPLIED AGAINST THE TAXPAYER'S TAX FOR SUCH YEAR OR YEARS, BUT SHALL NOT
EXCEED TWENTY-FIVE THOUSAND DOLLARS.
(4) (A) THE TERM "QUALIFIED REHABILITATION EXPENDITURE" MEANS, FOR
PURPOSES OF THIS SUBDIVISION, ANY AMOUNT PROPERLY CHARGEABLE TO A CAPI-
TAL ACCOUNT:
(I) IN CONNECTION WITH THE CERTIFIED REHABILITATION OF A QUALIFIED
RESIDENTIAL PROPERTY, AND
(II) FOR PROPERTY FOR WHICH DEPRECIATION WOULD BE ALLOWABLE UNDER
SECTION 168 OF THE INTERNAL REVENUE CODE.
(B) SUCH TERM SHALL NOT INCLUDE (I) THE COST OF ACQUIRING ANY BUILDING
OR INTEREST THEREIN, (II) ANY EXPENDITURE ATTRIBUTABLE TO THE ENLARGE-
MENT OF AN EXISTING BUILDING, OR (III) ANY EXPENDITURE MADE PRIOR TO
JANUARY FIRST, TWO THOUSAND FOURTEEN OR AFTER DECEMBER THIRTY-FIRST, TWO
THOUSAND NINETEEN.
(5) THE TERM "CERTIFIED REHABILITATION" MEANS, FOR PURPOSES OF THIS
SUBDIVISION, ANY REHABILITATION OF A CERTIFIED DISTRESSED RESIDENTIAL
PROPERTY WHICH HAS BEEN APPROVED AND CERTIFIED BY A LOCAL GOVERNMENT AS
BEING COMPLETED, WITH A CERTIFICATE OF OCCUPANCY ISSUED, AND THAT THE
COSTS ARE CONSISTENT WITH THE WORK COMPLETED. SUCH CERTIFICATION SHALL
BE ACCEPTABLE AS PROOF THAT THE EXPENDITURES RELATED TO SUCH REHABILI-
TATION QUALIFY AS QUALIFIED REHABILITATION EXPENDITURES FOR PURPOSES OF
THE CREDIT ALLOWED UNDER PARAGRAPH ONE OF THIS SUBDIVISION.
(6) (A) THE TERM "QUALIFIED RESIDENTIAL PROPERTY" MEANS, FOR PURPOSES
OF THIS SUBDIVISION, A DISTRESSED RESIDENTIAL PROPERTY LOCATED WITHIN
NEW YORK STATE:
(I) WHICH HAS BEEN SUBSTANTIALLY REHABILITATED,
(II) WHICH WAS CONSTRUCTED PRIOR TO JANUARY FIRST, NINETEEN HUNDRED
SIXTY-TWO,
(III) WHICH IS OWNED BY THE TAXPAYER, AND
(IV) WHICH IS LOCATED WITHIN A DISTRESSED RESIDENTIAL OR MIXED-USE
AREA, AS IDENTIFIED BY EACH LOCALITY THROUGH LOCAL LAW, THAT IS DEEMED
AN AREA IN NEED OF COMMUNITY RENEWAL DUE TO DILAPIDATION AND VACANCIES.

S. 2739--B 4

(B) IF THE DISTRESSED RESIDENTIAL PROPERTY IS RENTAL PROPERTY, SUCH
PROPERTY SHALL HAVE BEEN VACANT FOR AT LEAST SIX MONTHS WHILE ACTIVELY
MARKETED FOR LEASE.
(C) A BUILDING SHALL BE TREATED AS HAVING BEEN "SUBSTANTIALLY REHABIL-
ITATED" IF THE QUALIFIED REHABILITATION EXPENDITURES IN RELATION TO SUCH
BUILDING TOTAL TEN THOUSAND DOLLARS OR MORE.
(7) (A) IF THE TAXPAYER DISPOSES OF SUCH TAXPAYER'S INTEREST IN THE
QUALIFIED DISTRESSED RESIDENTIAL PROPERTY, OR SUCH PROPERTY CEASES TO BE
USED AS A RESIDENTIAL PROPERTY OF THE TAXPAYER WITHIN FIVE YEARS OF
RECEIVING THE CREDIT UNDER THIS SUBDIVISION, THE TAXPAYER'S TAX IMPOSED
BY THIS ARTICLE FOR THE TAXABLE YEAR IN WHICH SUCH DISPOSITION OR CESSA-
TION OCCURS SHALL BE INCREASED BY THE RECAPTURE PORTION OF THE CREDIT
ALLOWED UNDER THIS SUBDIVISION FOR ALL PRIOR TAXABLE YEARS WITH RESPECT
TO SUCH REHABILITATION.
(B) FOR PURPOSES OF SUBPARAGRAPH (A) OF THIS PARAGRAPH, THE RECAPTURE
PORTION SHALL BE THE PRODUCT OF THE AMOUNT OF CREDIT CLAIMED BY THE
TAXPAYER MULTIPLIED BY A RATIO, THE NUMERATOR OF WHICH IS EQUAL TO SIXTY
LESS THE NUMBER OF MONTHS THE BUILDING IS OWNED OR USED AS RESIDENTIAL
PROPERTY BY THE TAXPAYER AND THE DENOMINATOR OF WHICH IS SIXTY.
(8) ANY EXPENDITURE FOR WHICH A CREDIT IS CLAIMED UNDER THIS SUBDIVI-
SION SHALL NOT BE ELIGIBLE FOR ANY OTHER CREDIT UNDER THIS CHAPTER.
S 4. This act shall take effect immediately and shall apply to taxable
years beginning on or after January 1, 2014.

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